Cramer: 'We've had a terrific run' — it's time to trim some positions

The major U.S. indexes all declined during the session as investors revealed worries that the stock market has been too strong for its own good, CNBC’s Jim Cramer said Wednesday.

The Dow Jones Industrial Average shed about 163 points, while the S&P 500 and the tech-heavy Nasdaq Composite fell 0.75% and 0.57%, respectively.

“We’ve had a terrific run, so I am blessing you to do some selling tomorrow,” the “Mad Money” host said. “But other than that, I think we’re in fine shape — somewhat overheated, most definitely — but I still think it makes sense to stay the course.”

The Dow had its best four-month rally to start the year since 1987. The Nasdaq had its best showing in the same period since its big rally in 1999. No one wants 2019 to look like those two years, Cramer said.

“Nothing scares the daylights out of professional traders more than those two years,” he said. “If you’re a grizzled veteran like I am, you know those two years had a horrific pattern: They gave you rapid-fire rallies, which ultimately led to a pair of ignominious crashes.”

Cramer said he is always on the lookout for history to repeat itself. He said he had cash on hand when the stock market crashed in 1987, and he shorted tech stocks during the dotcom bubble burst in 2000, which followed the 1999 rally.

The current year doesn’t quite look like ’87 or ’99, but discipline is key, said Cramer, who trimmed positions in his ActionAlertsPlus.com charitable trust. Still, the Dow is up 13% this year, the S&P 500 is up 17% and the Nasdaq is up 21%, he noted.

“Any time you have a remarkable run, it never hurts to take something off the table. Nobody ever got hurt ringing the register,” Cramer said. “Bulls make money, bears make money, but hogs — they get slaughtered. In other words, please don’t be greedy.”

But it’s not time to sell everything like the veteran stock trader did in 1987, or to short stocks as he did in 2000. The strategy behind short selling is to borrow stocks that have potential to decline in hopes of making a profit when the share price falls.

Yet, the “tsunami of IPOs” coming to market is reminiscent of the dotcom era, Carmer said. There are seven deals this week, and many in the technology space. Uber is on its way to public markets next week.

“When you get too many IPOs in one sector, it’s incredibly toxic to the rest of the group because all of this new supply tends to overwhelm the demand,” he said. “Like any other market, when supply exceeds demand, prices … they go down. So the current deluge of deals is unnerving to anyone who traded during the dotcom bubble.”